What's in Store for Align Technology (ALGN) in Q2 Earnings?

Align Technology, Inc. ALGN is set to report second-quarter 2019 results on Jul 24, after the closing bell.

In the last reported quarter, the company delivered a positive earnings surprise of 7.2%. It has a four-quarter average positive earnings surprise of 8.5%.

Let’s take a look at how things are shaping up prior to this announcement.

Key Catalysts

Invisalign System

Align Technology is expected to have gained from continued adoption of Invisalign system in the second quarter of 2019. For the quarter under review, the company estimates Invisalign case shipments of 380,000 to 385,000, suggesting a 26% to 27% year-over-year improvement.

Invisalign portfolio expansion, anticipated revenue growth at the Clear Aligner segment on sustained Invisalign case volume growth across customer channels and geographies, and estimated growth in the teen patient segment are likely to aid the company’s results in the to-be-reported quarter. We are optimistic about the company’s Invisalign product portfolio strength as the momentum in Invisalign First, Invisalign Lite and Invisalign Go is likely to have continued through the second quarter.

Align Technology, Inc. Price and EPS Surprise

 

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote

We expect the company to register strong Invisalign volume growth in the Americas again, buoyed by continued strength in Ortho and GP channels. Align Technology’s continued investments in Latin America should get reflected in the company’s Invisalign volumes in this geography.

For International markets, management expects second-quarter volumes to grow sequentially, mirroring seasonally stronger periods for the EMEA and APAC regions. For the Americas, the company expects second-quarter volumes to show sequential increase on growth in key markets as well as a seasonally stronger period for North American orthodontists with the beginning of summer.

Scanner & Service Business to Drive Q2

Align Technology has been generating solid revenues from the Scanner and Service business over the past few quarters. The company has been witnessing increased adoption of iTero scanners for Invisalign case submissions, especially in North America and the EMEA region. Management anticipates this trend to reflect in second-quarter results.

The company entered into a distribution agreement with Benco Dental during the first quarter. The deal has most likely boosted the iTero Element portfolio of intraoral scanning technology and should reflect in the results of the to-be-reported quarter.

In March 2019, the company announced a tie-up with Digital Smile Design (DSD), a leader in holistic digital dentistry solutions for dental clinics, which offers the Invisalign System and iTero element scanners as a digital solution for tooth movement and scanning.

During the first quarter, Align Technology launched the iTero Element 5D Imaging System. It offers a comprehensive approach to clinical application, workflow and user experience, while broadening the iTero portfolio. These are expected to contribute to the company’s top line during the to-be-reported quarter.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for revenues is pegged at $595.6 million, indicating an improvement of 21.5% from the year-ago figure. The same for earnings per share (EPS) is pinned at $1.51, suggesting an increase of 16.2%.

Q2 Guidance

For the second quarter of 2019, the company projects EPS of $1.47-$1.54 on revenues of $590-600 million (indicating 20-22% growth from a year ago). Operating margin during the second quarter is estimated in the band of 24.5-25.4%. Further, continuation of the company’s operational expansion efforts might have resulted in second-quarter capital expenditure in the range of $85-$90 million. Depreciation and amortization expenses are estimated in the range of $20-$22 million.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Align Technology has a Zacks Rank #3 and an Earnings ESP of 0.00%, a combination that doesn’t suggest a beat for the company this earnings season. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post earnings beat this quarter.

AmerisourceBergen ABC has an Earnings ESP of +0.67% and a Zacks Rank #2.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #1.

Acadia Healthcare Company, Inc. ACHC has an Earnings ESP of +4.30% and a Zacks Rank #1.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Acadia Healthcare Company, Inc. (ACHC) : Free Stock Analysis Report
 
DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
 
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
 
AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research